UK & US firms face rising data costs despite upgrades

Research commissioned by Gresham indicates that 94% of financial institutions in the UK and US expect an increase in their data budgets for the upcoming fiscal year.

The study, involving 200 senior data decision-makers, highlights concerns regarding whether this budget surge is a deliberate strategic investment or indicative of a loss of control over spiralling costs.

According to the survey, while the necessity for increased data volumes and real-time accessibility drives the budget rise, many firms face challenges in monitoring and managing these escalating expenses effectively.

It was found that only a fifth of these institutions track data consumption, allocation, and costs in real time, while 42% conduct this exercise on a monthly basis. This infrequent monitoring hampers their ability to manage expenses adequately, thereby affecting financial outcomes.

Adding to financial strain, 34% of the respondents pointed to unexpected costs related to data management as a major issue due to unclear pricing models and unpredictable data usage. This results in unexpected billing increases that can stretch budgets.

The reliance on traditional manual tracking methods remains significant, with 44% of firms still using manual processes to track costs from varied sources and to reconcile vendor invoices. Such outdated practices lead to reporting delays and pose challenges in managing real-time consumption.

Efforts to control rising data costs are hampered where data ecosystems are not well-managed. Increased data requests and reporting adjustments frequently add to the financial pressure. As Neil Vernon, Chief Technology Officer at Gresham, noted, "While it's encouraging that almost all financial institutions are investing more in data management, there's a crucial concern about how these funds are being utilised. Is this increased spend a strategic investment to drive innovation, or are firms simply losing control over their costs due to hidden expenses and inefficiencies?"

The lack of modern data management systems may falsely seem economical at first but often leads to higher costs down the line. Vernon added, "Many organisations believe they're saving money by avoiding upfront investments in modern data management solutions. In reality, they incur greater expenses over time due to hidden costs and outdated practices. The lack of real-time cost monitoring and reliance on manual processes hinder their ability to manage expenses effectively and adapt to today's fast-paced data environment."

Gresham's findings stress the importance for financial institutions to upgrade their data management systems not solely to cut costs but to improve operational flexibility and keep a competitive stance within their sector.

Vernon further explained the potential benefits, "In our experience, clients migrating from legacy systems have achieved savings of over 60%. Operational teams have seen increased productivity improvements, demonstrating the transformative potential of modernising data management practices. Investing in robust, scalable data solutions now will lead to significant cost savings and operational benefits in the long run."